Under One Roof: A Study of Simultaneously Managed Hedge Funds and Funds of Hedge Funds

• 成果类型: Article
• 署名作者: Agarwal, Vikas; Lu, Yan; Ray, Sugata
• 署名单位: University System of Georgia; Georgia State University; University of Cologne; State University System of Florida; University of Central Florida; State University System of Florida; University of Florida
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2014.2126
• 发表日期: 2016
• 页码: 722-740
• 关键词: HEDGE FUNDS; funds of hedge funds; Agency problem; simultaneous management

摘要

We examine the simultaneous management of hedge funds and funds of hedge funds. Hedge fund firms can choose to simultaneously offer a fund of hedge funds. Similarly, fund of hedge funds firms can simultaneously offer a hedge fund. We find that although superior past performance and larger size drive the decision to become simultaneous for hedge fund firms, past flows drive the decision for fund of hedge funds firms. The effects of simultaneity are also different. When hedge fund firms start funds of hedge funds, we find evidence of value creation, driven by better management of economies of scale and cross learning. In contrast, fund of hedge funds firms starting hedge funds destroy value due to expansion beyond core competencies and agency problems. We find that firms learn about their competencies in the two business lines and discontinue underperforming simultaneity arrangements to focus on the business where they perform better.